retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: May 9, 2011

    by Kevin Coupe

    There was an interesting interview in the New York Times yesterday with Dominic Orr, president/CEO of Aruba Networks, a wireless networking company, in which he talked about his management style. An eye-opening excerpt:

    “I use a simple principle of management based on intellectual honesty.  You try to be intellectually honest with yourself, meaning that you have to forget about all the face-saving issues and so on. I tell people that if you work for me, you have to have a thick skin because there’s no time to posture.

    “I also tell people that everybody can be and will be momentarily stupid.  I think that in many large companies, a lot of politics arise because somebody makes a statement in a meeting, and then it’s weeks of wasted time and effort because they have to dig in to defend that position, and then politics come into play because they now want to lobby for their position. 

    “So when I interview key executives of my staff, I tell them that they need to accept that they can be, and will be, momentarily stupid. If they can accept that and be able to say, ‘Oh, I was momentarily stupid; let’s move on,’ then you don’t waste time dealing with that.”

    Words of wisdom ... about stupidity ... for a Monday morning.
    KC's View:

    Published on: May 9, 2011

    CNBC reports that a new study from Marin Software suggests that there is a correlation between high gas prices and increased e-commerce.

    The sample was small, but there seemed to be a specific trend suggesting that “consumers really do shop more online when gas prices are high as a way of eliminating trips to the store.”

    Anecdotally, the story notes that last month, when gas prices spiked, “Ie-commerce sales logged their highest single month of year-over-year growth since July 2007, jumping 19.2 percent from April 2010, according to Mastercard's SpendingPulse report.
    KC's View:
    Gee, y’think?

    I know that such studies need to be done, and these kinds of results need to be quantified.

    But this also strikes me as a no-brainer.

    And this specific trend just points to the broader, extended move toward e-shopping in all venues. As it gets more expensive to go out, people are going to be more selective about their trips. And the next generation of consumers, which often turns to e-commerce as a default move, will be more likely than the previous generation to adopt online or mobile options.

    Published on: May 9, 2011

    The New York Times had a piece the other day about how the Walmart board of directors decided to change the way in which its senior executives are compensated, removing same-store sales from the metrics used by the company at precisely the time that US same-store sales have been stagnant or falling for seven consecutive quarters.

    The company said that it made the change “to align our performance share goals more closely with our evolving business strategy.” However, as the Times notes, same-store sales are the “quintessential apples-to-apples comparison (that) measure the productivity at established stores and eliminate sales spikes that might occur when new stores open.” And the Times notes that since Walmart executives in the past reaped the benefits when same-store sales were up, taking this factor out of the compensation formula had the effect of “shifting the goal posts” when it was convenient and profitable for these executives.

    Furthermore, the piece quotes the estimable Burt Flickinger III, managing director at the Strategic Resource Group, as suggesting that the change “seemed especially unfortunate in light of the company’s decision late last year to end its longtime profit-sharing programs for lower level workers. This arrangement was created by Sam Walton, the company’s founder, and was a source of considerable pride to him.”

    “Taking away profit-sharing was the ultimate Ebenezer Scrooge story of the last holiday season,” Flickinger tells the Times. “Ebenezer makes all the money, and all the poor Cratchits working in the Wal-Mart stores become poorer and poorer.”

    The compensation adjustment, Flickinger says, amounts to “a failure to admit failure.”
    KC's View:
    One of the things that you hear more and more muttering about is a perceived disconnect between what is going on in Walmart’s Bentonville headquarters and what’s happening in the stores - that current leadership has far less of a laser-like focus on the stores and the consumer than Sam Walton did. And in certain quarters, that is as close to heresy as one can come.

    This compensation change just seems to underline the disconnect, and the feeling that management is on a short leash as it tries to get the company back on track.

    Published on: May 9, 2011

    The New York Times wrote over the weekend that “it has been two years since China’s government, reeling from nationwide outrage over melamine-contaminated baby milk that sickened 300,000 infants and killed at least 6, declared food safety a national priority. Since then, it has threatened, raided and arrested throngs of shady food processors — and even executed a couple.

    “But a stomach-turning string of food-safety scandals this spring, from recycled buns to contaminated pork, makes it clear that official efforts are falling short. Despite efforts to create a modern food-safety regimen, oversight remains utterly haphazard, in the hands of ill-trained, ill equipped and outnumbered enforcers whose quick fixes are even more quickly undone.”

    And the story gets even more stomach-turning:

    “In recent weeks, China’s news media have reported sales of pork adulterated with the drug clenbuterol, which can cause heart palpitations; pork sold as beef after it was soaked in borax, a detergent additive; rice contaminated with cadmium, a heavy metal discharged by smelters; arsenic-laced soy sauce; popcorn and mushrooms treated with fluorescent bleach; bean sprouts tainted with an animal antibiotic; and wine diluted with sugared water and chemicals.

    “Even eggs, seemingly sacrosanct in their shells, have turned out not to be eggs at all but man made concoctions of chemicals, gelatin and paraffin. Instructions can be purchased online, the Chinese media reported.

    “Scandals are proliferating, in part, because producers operate in a cutthroat environment in which illegal additives are everywhere and cost-effective. Manufacturers calculate correctly that the odds of profiting from unsafe practices far exceed the odds of getting caught, experts say. China’s explosive growth has spawned nearly half a million food producers, the authorities say, and four-fifths of them employ 10 or fewer workers, making oversight difficult.

    “China’s iron political controls ensure that no powerful consumer lobby exists to agitate for reform, press lawsuits that punish wayward producers or lobby the government to pay as much attention to consumer safety as it does to controlling threats to its own power. Instead, like Alice after falling through the rabbit hole, consumers must guess what their food and drink contain.”
    KC's View:
    This expands on a Los Angeles Times story from a few weeks ago, and just underlines the need for greater vigilance in our imports from China ... and, perhaps, the need for even more extensive Country of Origin Labeling (COOL) here in the US.

    Published on: May 9, 2011

    The Financial Times reports that Tesco’s California operations - where it operates three-quarters of its US Fresh & Easy Neighborhood Market stores - could be threatened by “a proposed change to liquor laws” there that “would ban sales of alcohol at self-service checkouts.”

    All of Tesco’s Fresh & Easy stores have only self-checkout lanes, and analysts say that if extra staff had to be hired to handle liquor sales, it would create additional pressure on already thin profit margins.

    Tesco says that its staff does check ID for anyone buying liquor, and charges that the bill is being pushed by pro-union interests that are angered by Tesco’s non-union status.

    A similar bill was passed by the legislature last year but was vetoed by then Governor Arnold Schwarzenegger; it is not anticipated that current Governor Jerry Brown would take the same position.
    KC's View:
    No doubt Tesco’s California lobbyists will be working overtime on trying to derail this legislation, which sounds sort of bogus if, in fact, staffers are interceding on all - or at least, all suspicious - alcohol sales.

    Hard to imagine that this would be enough to get Tesco to either sell or pull the plug on its Fresh & Easy experiment, which is what some people think. But methinks the clock may be ticking more loudly that it was just a year ago.

    Published on: May 9, 2011

    Bloomberg reports that many of the nation’s restaurants want to take advantage of the nascent economic recovery and raise prices.

    “The fact that the airline industry was able to pass along cost increases signals that the pricing environment has become somewhat more favorable than it was during the heart of the recession,” Dean Maki, chief U.S. economist at Barclays Capital in New York, tells Bloomberg. “It’s more likely restaurants will be able to pass along price increases now relative to the last few years.”

    The price increases also will be seen, experts say, in the form of higher-priced items that might have been dropped from menus a few years ago.
    KC's View:
    The larger issue seems to be whether such price increases, which are going to be seen in a wide range of sectors, will lead to inflation, and what impact that will have on a still-fragile economy.

    Published on: May 9, 2011

    The Irish Examiner reports that Select Retail Holdings asserts that its Superquinn supermarket chain there is not for sale, despite media reports that the Musgrave Group, which owns Supervalu stores there - had made a bid for the legendary retailer.

    Musgrave is not commenting on the report.
    KC's View:
    If I had to guess, it is not a matter of Superquinn not being for sale ... but rather, not being for sale at the price that Musgrave wants to pay. The Irish economic crisis has not been kind to Superquinn, and Select Retail Holdings would love to find a way out. But it is not a seller’s market.

    Published on: May 9, 2011

    USA Today reports that McDonald’s is “undertaking its biggest store-by-store makeover in the chain's 56-year history,” a $1 billion effort that will help the fast feeder look less like the kiddie restaurant and more like Starbucks - or, as the article puts it, “comfortable enough to hang out in long after you've gobbled down your burger, fries — and smoothie.”

    The story goes on: “Goodbye, fiberglass tables and industrial steel chairs. Adios, neon-yellow, bright-red interiors. Hello, wooden tables, comfortable faux leather chairs and interiors newly painted in muted oranges, yellows and even subtle greens ... No more clown-red roofs. No more confusion about what door to use. And that all-too-familiar white facade has been replaced with more inviting earth tones and glass.”

    And, USA Today writes, “McDonald's isn't just doing this to make customers cozy. It's doing it to try to quash its rivals - particularly Burger King and Wendy's - that don't have McDonald's deep pockets and the recent sales success necessary to make such costly upgrades. It's doing it to try to pry customers away from slightly pricier casual chains, including Panera Bread and even Chipotle, the Mexican chain that had once been partly owned by McDonald's. And it's doing it to begin cementing a new image of McDonald's in the minds of consumers.”

    As many as 800 stores are expected to be overhauled this year.
    KC's View:
    Hard for me to imagine McDonald’s as a “third place,” but I bring such a strong anti-fast food bias to the discussion that I may not be the best judge of such things.

    Published on: May 9, 2011

    Apparently, all is not fair in love, nor in economic recovery scenarios.

    The Wall Street Journal reports that while men took it on the chin during the recession - with more men losing jobs than women - it appears that the recovery is being kinder to men than women, with men “recovering labor market losses faster than women.”

    What seems to have happened is that the area in which women seemed to “disproportionately represented” in the public sector, which is where a lot of cuts are now coming. Men, on the other hand, have a higher representation in private industry, which is where the hiring seems to be happening right now.
    KC's View:
    First, this suggests that despite the fact that women make up 46.8 percent of total U.S. labor force, and women control 80 percent of US consumer spending, they continue to be under-represented on the business side.

    Second, it implies that a common complaint - that government continues to grow while private industry isn’t hiring - may not be so.

    So much for conventional wisdom.

    Published on: May 9, 2011

    The New York Times reports that big box DIY stores such as Home Depot and Lowe's are “adding bar codes to certain products that give potential buyers on-the-spot access to product reviews and ratings, how-to guides and videos.

    “This will gradually expand across a greater range of products in the thousands of stores across the country as the huge home improvement retailers, which have been hit by the poor economy, seek to prompt consumers to undertake repairs or renovations they have been delaying.”
    KC's View:
    The ability of companies to provide more information via bar codes, and the willingness of consumers to access that information, further drives us toward a consumer-centric retailing universe. Resistance, as they say, may be futile.

    Published on: May 9, 2011

    • The Wall Street Journal reports that the House of Representatives will consider legislation that “would prohibit companies from tracking children on the Internet without parental consent, restrict online marketing to minors and require an ‘Eraser Button’ that would allow parents to eliminate kids' personal information already online.”

    The bill, according to the Journal, has bipartisan support and “would go well beyond existing federal law. The Children's Online Privacy Protection Act of 1998 only requires websites aimed at children under 13 to obtain parental permission before collecting personal information such as kids' names or email addresses. The new legislation, among other things, would prohibit companies from using or providing to third parties personal information of kids under 18 for ‘targeted marketing purposes’.”

    • The International Association for Food Protection (IAFP) has announced that the Rapid Recall Exchange is the recipient of the Food Safety Innovation Award. This prestigious award recognizes new ideas, practices, or products that have a positive impact on food safety - improving public health and quality of life.

    Created in September 2009 by the Food Marketing Institute (FMI) and GS1 US, Rapid Recall Exchange is designed to provide “timely and accurate product recall and withdrawal notifications to its members through a convenient web-based service that allows two-way communication between suppliers and retailers/wholesalers.  In less than two years, more than 600 companies have subscribed to Rapid Recall Exchange, including 21 of the 24 largest supermarket chains based in the United States.”

    • The Wall Street Journal reports that the Chinese government has fined Unilever the equivalent of $308,000 (US) for making public statements about planned price increases, saying that the comments “disrupted market order.”

    According to the story, “The fine issued to Unilever comes as Chinese consumers have grown fearful of the increasing costs of their food and other daily necessities. To soothe their woes, China's leaders, who believe state power is a critical component to maintaining economic growth and stability, have stepped in. But the Chinese government has limited tools to curb inflation in part because of its exchange-rate regime.”
    KC's View:

    Published on: May 9, 2011

    • The Denver Post reports that “Chris Sherrell has been appointed chief executive of Boulder-based Sunflower Farmers Market, a position he has held on an interim basis since CEO Michael Gilliland resigned on Feb. 12 ... following a sting in which he was accused of soliciting sex with an undercover police officer posing as an underage girl.”

    The Post notes that Gilliland, who has pleaded not guilty, is scheduled to go on trial on August 9.
    KC's View:

    Published on: May 9, 2011

    Responding to last week’s story about Supervalu’s new sustainable seafood policy, one MNB user wrote:

    Please understand that “sustainable fisheries” is just a marketing buzzword and has no definition.

    Are we to believe those governmental agencies or international bodies that took fisheries to the brink of extinction are now able to determine if those fisheries are now sustainable or that NGOs are able to lead the agencies to ecological epiphanies while being paid to provide third party certifications… I fear business has just given them a different vocabulary to get the same results. Glass half full on this one!

    I took yet another swipe at the bankrupt Sbarro pizza chain, which led MNB user George Denman to write:

    Interesting article on Sbarro. I travel extensively and eat many a meal in airport fast food operations. Being a lover of good pizza, I avoid this venue with a passion for like you, I prefer a great NY slice, not their doughy sweet sauce version. Our brand Graeter’s continues to make a hit coast to coast now as we enter our 40th state in just 16 months since our decision to launch national. The article in Forbes Magazine summed up our success succinctly through these 5 strategies:

    Grow big , not bad - avoid the dilemma that Krispy Kreme encountered by going into the wrong venues where retailers cannot showcase your product.

    Details can be defining - investing in the best ingredients and ensuing quality control on every pint ensures that the Graeter experience is optimal each and every time. We use the best chocolate in the industry, Peter’s, to create those huge chocolate chunks that our fans come to expect. We could make the ice cream like competitors mass production using inclusions but that is not what we are.

    Be true to your identity—know who you are and who you want to sell and don’t deviate from that plan.

    There is no marketing advantage like a product advantage. You have eaten our product. “Nuff said”!!

    If your product is working talking about let it speak for itself. Maybe that is why Graeter’s has close over 130,000 Facebook fans and growing everyday. Having celebrity fans talking about your product on TV and radio like Tony Kornheiser, Susan Lucci, Nate Barkus, James Patterson, and Oprah is letting the product speak for itself….

    I don’t normally let manufacturers have what in essence is a free commercial ... but in this case, I think the Graeter’s vs. Sbarro comparison is instructive.

    Besides, I love Graeter’s. So what the hell.

    Regarding another chain that I spoke highly of recently, MNB user David Moen wrote:

    I love Burgerville……too bad I don’t live in the Northwest anymore. This is another company worth learning from, they have great food, they cater to the season, and they have somehow taken the “cheap” out of fast food (which they are not real cheap or fast) and have made dinning away from home a good experience at a reasonable price.

    And, I got the following email on Friday:

    As always, I read your Offbeat note this morning with great interest.  The concept of knowing you are reading the last work of a treasured author is intriguing to me.  With many authors you may not realize you've read the last work until it's too late.  Perhaps my favorite author (he's certainly in my top 5) is John Irving, who in turn has a favorite in Charles Dickens.  Irving has read every book Dickens has written save one, "Our Mutual Friend".  Irving says he keeps a copy of the book in all of his homes and is saving it for old-age or a severe illness. That way, he says he knows he will have at least one good book to read.

    I guess it's a little late for me to make this suggestion with the Robert B. Parker series, but I thought it was interesting nonetheless (and I guess it wouldn't work well with a serial type story that's going to have a new author anyway).

    BTW - I couldn't disagree more with the letter this week suggesting there is too much talk of wine, movies, pizza and books in your product.  That's what keeps me coming back!  Keep up the great work.  On the pizza front, I grew up in Stamford, CT and recall many great pizza joints.  The one that always brings back fond memories was Pappas Pizza somewhere downtown.  I lived in North Stamford and didn't find Pappas until I was in HS/college and had access to a car (thanks mom and dad).  I waited tables in any number of restaurants in Stamford during HS and college and the late night hangout back then for the waiter/waitress crowd was Bobby V's downtown.  If I recall correctly Pappas was near Bobby V's, but middle age has caught up with my memory and that may not be right.  To that end, I'm not sure if either place still is in business, but if they are I highly recommend them!

    They are both there ... though I must confess that even though I’ve lived in the area for 27 years, I’ve never been to Pappas. I’ll have to rectify that...
    KC's View:

    Published on: May 9, 2011

    The defending NBA world champion Los Angeles Lakers were beaten by the Dallas Mavericks 122-86 yesterday, resulting in a four game second round sweep of the Lakers that also ended the legendary coaching career of Phil Jackson, who has guided 11 teams to NBA championships.
    KC's View: